Is Luckin Coffee now a "capital-protected wealth management project"?
Not long ago, a co-operated merchant told *Caijing* that Luckin Coffee has become a "capital-protected wealth management product". With the same store construction cost, the payback period for new stores has been extended. Operators can no longer earn huge profits easily, but they will not suffer huge losses easily either. In other words, their losses are limited, but it is also difficult to make big money.
This statement reflects the real operational dilemma Luckin is facing at present: on one hand, Luckin is still rapidly expanding its footprint, with its store scale continuing to grow, and it keeps expanding non-coffee products such as tea drinks, trying to transform into a comprehensive ready-to-drink beverage platform; on the other hand, the actual profit margin of franchisees is constantly being compressed, and the returns from joining Luckin are not as good as before.
Total Stores Exceed 36,000, Franchise Proportion Continues to Rise
According to the financial report, as of June 30, 2026, the total number of Luckin Coffee's global stores reached 36,310, with a net increase of over 5,000 stores in the first half of the year. Among them, 36,087 stores are located in the Chinese market, accounting for 99.4% of the total number of stores, which remains the core layout region. The proportion of overseas stores is relatively low, and their contribution to the company's revenue is almost negligible.
From the perspective of store structure, both self-operated stores and co-operated (franchise) stores are expanding simultaneously, while the growth of the franchise channel continues to increase. By the end of the second quarter, there were 23,734 self-operated stores worldwide and 12,576 co-operated stores, with the proportion of co-operated stores reaching 34.6%, which is basically the same as 34.8% at the end of 2025, but the absolute number has a net increase of 1,762 compared with 10,814 stores at the end of 2025.
Image sourced from Can Baodian
On the revenue side, Luckin's co-operated store revenue in the second quarter of 2026 was 36.68 billion RMB, a year-on-year increase of 27.9%, accounting for 23.1% of total net revenue. Compared with the co-operated revenue of 28.67 billion RMB and the scale of 9,238 co-operated stores in the same period of 2025, it can be seen that the revenue growth of the franchise business is highly bound to store expansion — the number of stores increased by 36.1% year-on-year, while the co-operated revenue increased by 27.9% year-on-year. The revenue growth rate is lower than the store growth rate, which has shown signs of diluted single-store output.
Luckin's continuously densified store network is a double-edged sword for franchisees: they not only enjoy the traffic spillover and improved supply chain efficiency brought by the expansion of brand scale, but also have to face the downward pressure on single-store output caused by the diversion of sales from stores of the same brand.
While the number of stores and revenue continue to expand, the same-store sales of Luckin's self-operated stores in the second quarter decreased by 5.3% year-on-year, with the decline further widening compared with that in the first quarter. Compared with self-operated stores, the revenue decline of partner stores is more obvious, which indicates that co-operated stores are facing deeper pressure.
Luckin Steps Up Layout in Non-Coffee Categories
Luckin does not want to only sell coffee. In August 2024, Luckin launched the strategic product "Light Jasmine Light Milk Tea", and formally proposed the concept of "coffee in the morning, tea in the afternoon", which can be regarded as the starting point of Luckin's strategic layout in the tea track. Subsequently, Luckin continued to promote the transformation into a "full-category ready-to-drink beverage platform", and the proportion of non-coffee categories kept increasing.
According to Luckin's 2025 financial report, the company launched more than 140 new products throughout the year, and the proportion of non-coffee beverage cup sales has exceeded 20%; in the second quarter of 2026, the company continued to launch 28 new ready-to-drink beverages and more than ten snack products, and the SKU proportion of non-coffee categories further increased. Rough statistics show that in the first half of this year, non-coffee new products accounted for nearly half of the new or returning beverages launched by Luckin. While this strategy broadens consumption scenarios, it also brings new challenges to store operation and market competition.
1. Pressure brought to store operation
The expansion of tea drink categories directly increases the operational complexity and operating cost of stores:
First, the increase in the number of SKUs pushes up the error rate and preparation difficulty. The raw materials of coffee products are relatively standardized, while tea drinks involve a variety of raw materials such as fresh fruits, milk foam, and tea base, with more complex processes, higher requirements for staff proficiency, and increased inventory management difficulty and raw material loss rate.
Second, personnel training and labor costs rise. Employees need to master the processes of both coffee making and tea making at the same time, the training period is extended, and the labor cost increases accordingly. During peak hours, the parallel operation of multiple categories may also affect the order delivery efficiency, and then affect consumer experience. It is worth noting that after more and more non-coffee drinks are launched, the work intensity of employees has increased. In the past, the process of making a cup of coffee was simple, but now there are more and more new tea drink products, while the time for making each cup remains unchanged, leading to a substantial increase in workload. Some store employees feel that the formulas of non-coffee drinks are difficult to remember and new products are hard to make.
Third, equipment and space costs increase. Some tea drink products require additional equipment such as ice makers, refrigerated cabinets, and tea extractors, so franchisees' initial equipment investment and store space requirements increase accordingly.
Image sourced from Can Baodian
2. Challenges for Luckin to expand tea drink business
From the industry perspective, Luckin faces several challenges when entering the tea drink track:
First, brand mindset. Consumers' perception of Luckin is still "cost-effective coffee", and the mindset of tea drink has not been established. Traditional tea drink brands such as Mixue Ice City and Guming have been deeply engaged in the track for many years, and have accumulated rich experience in tea supply chain, fresh fruit processing, and product flavor iteration, with solid user mindset. Although Luckin put out a wave of advertisements this year to try to improve its user recognition in the tea drink field, the effect is not very ideal.
Second, the difficulty of supply chain adaptation. The core raw materials of tea drinks (fresh fruits, dairy products) are significantly different from those of coffee, with higher requirements for cold chain and freshness management. Luckin's original supply chain system was built around standardized raw materials such as coffee beans and syrup, so adapting to tea drink categories requires continuous investment and adjustment.
Third, price band competition barriers. Luckin's tea drink products have no advantage in price; in the sinking market, the store density and channel penetration of tea drink brands far exceed those of Luckin.
Tea Drink Brands Cross into Coffee Track
While Luckin is expanding its tea drink business, tea drink brands such as Mixue Ice City, Guming, Hushang Ayi, and Cha Baidao are also increasing their layout in coffee. The entire beverage industry has formed a two-way penetration pattern of "coffee brands making tea, tea brands making coffee". The coffee layout of mainstream tea drink brands has shifted from trial operation to large-scale promotion, forming direct competitive pressure on Luckin.
1. Coffee Layout of Tea Drink Brands
Mixue Ice City is systematically expanding its coffee business in the way of "subsidy + full-store fresh grinding upgrade". The core action is to replace the original drip coffee with freshly ground coffee, and support it with raw material upgrade and affordable strategy, trying to open up a new growth curve outside its main tea drink business.
According to Guming's financial report, as of June 30, 2026, about 13,500 stores of the company have been equipped with coffee machines, with a store coverage rate of over 90%; in the first half of 2026, a total of 12 new coffee products were launched, and the sales proportion of coffee categories exceeded 20%. The coffee business not only helps Guming increase the revenue of single stores, but also fills the gap of morning consumption period. Guming has reaped tangible benefits from its coffee business.
Hushang Ayi's coffee business has evolved from the early "in-store shop" attempt to an important strategic level of the company: two-wheel drive of tea and coffee. At present, coffee has been deeply integrated into the main brand stores, becoming an important starting point to improve single-store efficiency and expand breakfast scenarios. However, the current "two-wheel drive of tea and coffee" is more like a defensive expansion, aiming to increase store visit rate and customer unit price through coffee to ease the growth pressure of the main brand's tea drink business.
Cha Baidao launched 15 new coffee products in the first half of 2026, with freshly ground coffee machines covering more than 2,700 stores, and regards the coffee business as an important strategic direction to broaden consumption scenarios and enhance store vitality. Cha Baidao started its coffee business relatively late, and there is a certain gap compared with several other brands.
2. Possible Impact on Luckin
Tea drink brands crossing into the coffee track may have a direct impact on Luckin's franchise business:
First, competition in the sinking market intensifies. The store networks of Mixue Ice City, Guming, and Cha Baidao deeply cover third- and fourth-tier cities and county markets. As they launch coffee products, the coffee demand in the sinking market will be diverted locally, and the growth space of Luckin's franchisees in the sinking market will be directly compressed.
Second, overlapping price bands. The pricing of coffee products of tea drink brands is mostly between 8 and 15 yuan, which highly overlaps with Luckin's main price band. With their original supply chain and store network, tea drink brands can maintain a low cost structure, posing challenges to Luckin's cost-effective advantage.
Third, all-scenario competition escalates. The core consumption scenarios of coffee are in the morning and working days, while the core scenarios of tea drinks are in afternoon tea and leisure time. After two-way penetration, the competition between the two sides shifts from a single category to all time periods and all scenarios, and the competition for store passenger flow becomes more intense.
Returns from Joining Luckin Are Narrowing
Combined with financial report data and the industry pattern, the statement that "joining Luckin is equivalent to capital-protected wealth management" has a certain basis. Compared with other catering franchise projects, the risk of joining Luckin is relatively low, for several reasons:
First, brand traffic is relatively stable. Luckin has established strong brand recognition, which provides basic passenger flow guarantee for stores, and the customer acquisition cost of newly opened stores is much lower than that of other niche brands. Although Luckin has encountered several failed co-branding activities this year, it has not caused a huge impact on the brand for the time being.
Second, the operation system is standardized. From site selection, decoration to raw material supply, personnel training and digitalization, Luckin has formed a complete standardized system, which reduces the operation difficulty for franchisees and their dependence on personal ability.
Third, supply chain advantage. Luckin builds its own supply chain system, and the supply of raw materials and price fluctuations are relatively controllable.
Image sourced from Can Baodian
However, as the saying goes, "Franchise involves risks, and investment needs to be cautious". Low risk does not mean capital protection, let alone stable returns. For Luckin's franchisees, multiple factors are squeezing their profit space:
First, the revenue of single stores continues to decline. Whether it is self-operated or co-operated stores, the output of single stores shows a downward trend. As store density continues to increase, the diversion effect will further appear, and the single-store revenue may continue to face pressure in the future.
Second, operating costs rise. The increase in raw material cost, labor cost and equipment cost brought by the expansion of tea drink categories will directly erode the profit space of co-operated merchants. At the same time, expanding the tea drink business will bring great pressure to store operation, and the operation difficulty will increase.
Third, cross-border competition intensifies diversion. Tea drink brands enter the coffee market with more extensive sinking networks and lower prices, which will seriously divert Luckin's potential customers, especially for community stores and stores in the sinking market.
In short, joining Luckin is not a "capital-protected wealth management-style" investment. In essence, it is a physical business with continuously narrowing return elasticity. Its profitability highly depends on store site selection, regional competition pattern and operation management capability: stores in core business districts and high-traffic locations can still maintain a good profit level; while stores in high-density areas and sinking markets may face the pressure of declining revenue and shrinking profits, and even suffer losses.
This article is from the WeChat official account "Can Baodian", written by the Editorial Department of Can Baodian, and authorized for release by 36Kr.